Tuesday, July 31, 2012

Congressional
leaders are working feverishly on a six month continuing budget resolution they
hope to announce later today or tomorrow, which would avert the threats of huge
defense contractors and other businesses trading with the federal government to
issue their employees hundreds of thousands of layoff notices required by the
WARN Act. That law requires employers of more than 100 workers to give 60 days
warning of layoffs planned in response to foreseeable events – events like
federal government shutdowns or deep spending cuts at government agencies. Some
states have stricter laws requiring 90 days notice.

Employers
face fines up to $100/day/employee for failing to give the required layoff warning.
August 2 is the 60 day deadline before the October 1 start of the federal
fiscal year. So, without Congressional action which can be predicted to keep
government agencies spending next fiscal year, notices could go out later this
week. If they do, each party will blame the other for the ensuing economic
panic. The Obama administration’s Labor Department has already issued guidance
to government contractors contending that no WARN Act notices need to be given
at this point in time, but that guidance will not be binding on the courts
which will apply the act – and the fines – should a shutdown actually happen,
and result in contractor layoffs. Defense contracting giant Lockheed Martin
says it may issue as many as 100,000 WARN notices if Congress does not pass a
deal, or at least announce one. EADS is following suit. Boeing says it is
planning for a “worst case scenario.”

Other
government contractors have declined to comment, while their employment lawyers
try to parse the latest Labor Department guidance.

Economists
predict the worst for American businesses if mass notices go out. “If I’m being
warned about my job,” Bank of America economist Ethan Harris says, “then I’m going
to start acting as though there’s a real chance that I won’t be employed coming
forward. It will have a freezing up effect.”

Whether
or not a deal can be reached remains to be seen. The only certain thing is that
the politicians on both sides of the aisle are more highly motivated by the
uncertainty respecting who the voters will blame for the mess than they are
about exercising real leadership for their constituents.

Congressional
leaders are working feverishly on a six month continuing budget resolution they
hope to announce later today or tomorrow, which would avert the threats of huge
defense contractors and other businesses trading with the federal government to
issue their employees hundreds of thousands of layoff notices required by the
WARN Act. That law requires employers of more than 100 workers to give 60 days
warning of layoffs planned in response to foreseeable events – events like
federal government shutdowns or deep spending cuts at government agencies. Some
states have stricter laws requiring 90 days notice.

Employers
face fines up to $100/day/employee for failing to give the required layoff warning.
August 2 is the 60 day deadline before the October 1 start of the federal
fiscal year. So, without Congressional action which can be predicted to keep
government agencies spending next fiscal year, notices could go out later this
week. If they do, each party will blame the other for the ensuing economic
panic. The Obama administration’s Labor Department has already issued guidance
to government contractors contending that no WARN Act notices need to be given
at this point in time, but that guidance will not be binding on the courts
which will apply the act – and the fines – should a shutdown actually happen,
and result in contractor layoffs. Defense contracting giant Lockheed Martin
says it may issue as many as 100,000 WARN notices if Congress does not pass a
deal, or at least announce one. EADS is following suit. Boeing says it is
planning for a “worst case scenario.”

Other
government contractors have declined to comment, while their employment lawyers
try to parse the latest Labor Department guidance.

Economists
predict the worst for American businesses if mass notices go out. “If I’m being
warned about my job,” Bank of America economist Ethan Harris says, “then I’m going
to start acting as though there’s a real chance that I won’t be employed coming
forward. It will have a freezing up effect.”

Whether
or not a deal can be reached remains to be seen. The only certain thing is that
the politicians on both sides of the aisle are more highly motivated by the
uncertainty respecting who the voters will blame for the mess than they are
about exercising real leadership for their constituents.